Gold is currently enjoying an exceptional year, potentially marking its most robust performance since 1978. Even as various technical indicators suggest the metal is currently overbought, financial experts anticipate its upward trajectory will persist.
While the Relative Strength Index (RSI) for gold has consistently stayed above 70 for several weeks, and prices are significantly higher than both their 50-day and 200-day moving averages, these metrics, typically indicative of an asset being overextended, have not deterred optimistic forecasts. Analysts point to the surprisingly low allocation of gold in both private and institutional portfolios as a key factor. This under-ownership provides ample room for increased investment, particularly if concerns over inflation or geopolitical instability grow. The recent surge has also been fueled by substantial inflows as investors shift away from equities towards more secure assets like gold.
Driving this momentum are several "conviction buyers," including a notable increase in exchange-traded fund (ETF) holdings, heightened speculative trading activity, and a resurgence in central bank acquisitions following a quieter summer period. With these strong underlying forces, many analysts, including those from Goldman Sachs, maintain a positive outlook, projecting further price increases and suggesting that the risks are weighted towards the upside rather than a downturn.
The current gold rally, fueled by a combination of under-ownership, investor rotation into safe havens, and strategic purchases, reflects a broader market sentiment seeking stability amidst economic uncertainties. This ongoing interest underscores gold's enduring role as a critical component in diversified investment strategies, highlighting its potential to offer protection and growth in dynamic financial landscapes.